first quarter report 2019

First Quarter Report

2019

Key figures Q1 2019 Q1 2018 Q4 2018 USD thousands

(except earnings per share)

Revenues 390,232 418,206 489,053

Gross margin in % 32% 36% 35%

(adjusted – see footnote 1)

Result from operations 23,506 71,385 61,648


Operating margin in % 6% 17% 13%


Net result (adjusted – see footnote 3)

-9,456 92,322 1,687

Basic / diluted earnings per

share in CHF 2)

(adjusted – see footnote 3) -0.12 / -0.12 1.20 / 1.12 0.02 / 0.02

Basic / diluted earnings per share in USD

(adjusted – see footnote 3) -0.12 / -0.12 1.15 / 1.08 0.02 / 0.02

Total backlog 288,370 319,598 331,368

(excluding consignment stocks)

1) Excluding acquisition-related and share-based compensation costs. 2) Earnings per share in CHF were converted using the average currency exchange rate for the respective periods. 3) Net result and earnings per share excluding valuation effect of the option element of the USD convertible bond.

First Quarter Report 2019

www.ams.com page 2/15

First quarter revenues at top end of guidance range and operating

profitability above guidance despite seasonality; signs of consumer

market stabilizing, ongoing customer success in optical and 3D

sensing; positive sequential development expected for the second

quarter with revenues of USD 390-430 million and higher adjusted

operating margin of around 10%

Report to shareholders on the first quarter of 2019

Ladies and Gentlemen

Our first quarter results show an attractive development of revenues and profitability which was again

driven by our consumer business. As consumer market demand appears to stabilize, new product

ramps in the smartphone market supported our business in the first quarter.

Financial results

Frist quarter group revenues were USD 390.2 million, at the upper end of expectations, down 20%

sequentially compared to the fourth quarter 2018 and down 7% from USD 418.2 million in the same

quarter 2018. Adjusted gross margin for the first quarter was 32% (excluding acquisition-related and

share-based compensation costs) with IFRS reported gross margin at 29% (including acquisition-

related and share-based compensation costs), compared to 36% and 33% respectively in the same

quarter 2018.

The adjusted result from operations (EBIT) for the first quarter was USD 23.5 million or 6% of

revenues (excluding acquisition-related and share-based compensation costs, above previous

guidance, while decreasing from USD 71.4 million in the same period 2018 (USD -4.5 million or -1% of

revenues including acquisition-related and share-based compensation costs, down from

USD 43.0 million in the same period 2018).

Adjusted net income for the first quarter was USD -9.5 million (excluding valuation effect of option

element of foreign currency convertible bond), compared to USD 92.3 million for the same period 2018

(first quarter 2019 including valuation effect: USD -9.5 million). Adjusted basic/diluted earnings per

share for the first quarter were CHF -0.12/-0.12 or USD -0.12/-0.12 based on 80,235,377/81,864,338

shares (weighted average; first quarter 2019 including valuation effect: CHF -0.12/-0.12 or USD -0.12/-

0.12; first quarter 2018: CHF 1.20/1.12 or USD 1.15/1.08 based on 80,064,021/83,082,083 shares,

weighted average).

Operating cash flow for the first quarter was USD 96.1 million, significantly up from USD 52.0 million in

the same quarter last year. Total backlog on 31 March 2019 (excluding consignment stock

agreements) was USD 288.4 million compared to USD 331.4 million at the end of the year 2018 and

USD 319.6 million on 31 March 2018.



Business overview

Our business performed very well in the first quarter of 2019 with results at the top end or above our

expectations. Driven largely by our consumer business we recorded this positive development despite

generally more subdued end market environments in addition to typical strong seasonality in the

consumer market.

Our consumer business once more provided the largest contribution to our overall results. As the

leader in optical sensing our unmatched portfolio spans high performance solutions for 3D sensing

including VCSEL (Vertical Cavity Surface-Emitting Laser)-based illumination, high quality display

management including behind-OLED and TrueColor technologies, micro-scale proximity sensing, bio-

and spectral sensing, and other optical applications.

We are a leading provider of 3D sensing technology supplying significant volumes of 3D sensing

solutions to consumer OEMs. We leverage our extensive 3D sensing portfolio and system know-how

including 3D hard- and software for all three approaches structured light (SL), time-of-flight (iToF), and

active stereo vision (ASV). With a current focus on 3D illumination, we support both front-facing and

world-facing 3D systems. As previously indicated, the market is moving along a multi-year adoption

timeline for front-facing as well as world-facing 3D sensing where the adoption of front-facing 3D is

expanding at a good pace and world-facing 3D sensing, as anticipated, is seeing instances of early

adoption.

We are experiencing the anticipated positive momentum for wider adoption of 3D sensing this year. In

line with previous comments we saw the start of expected Android smartphone launches that include

ams 3D technology in the first quarter. The previously mentioned illumination solution for a world-

facing 3D sensing system at a major Android OEM has started volume shipments as expected. As

anticipated, we expect additional 3D sensing-enabled Android devices with ams 3D illumination to be

launched over the course of 2019. The range of ams 3D solutions across Android devices either

already launched or expected to be launched in 2019 comprises several front-facing 3D illumination

systems including iToF solutions, the first world-facing illumination solution mentioned above and a

first use of ASV. These successes are creating an expanded customer base for our 3D sensing

portfolio that includes the world’s leading smartphone OEMs. At the same time, they underscore our

position as a leading provider of 3D sensing across technologies.

Our advanced high power VCSEL portfolio is a core driver of our market success in 3D sensing. Our

VCSEL technology offers advantages for 3D sensing illumination in all technologies SL, iToF and ASV.

Moreover and in contrast to VCSEL-focused vendors, we are able to provide full 3D illumination

solutions to OEMs which incorporate VCSELs, VCSEL drivers, optics, module design and/or

manufacturing. As these solutions offer high differentiation and fully optimized design for performance

our capabilities create an additional meaningful competitive advantage. We therefore see ongoing

customer traction in 3D sensing where our solution portfolio supports dot projection, pattern projection,

different types of flood illumination and ToF proximity sensing. Based on this portfolio covering SL,

iToF and ASV we are establishing a strong market position in 3D sensing illumination.

We recently launched an industry-leading long-distance 1D ToF solution which provides accurate

distance measurement up to around 2.5 meters. Interest from consumer OEMs is already significant



looking at applications such as laser detect autofocus (LDAF) for smartphone backside cameras. In

addition, we are seeing increasing interest from other markets such as IoT.

In display management, our innovative technology for high performance behind-OLED-display

proximity and light sensing is a resounding success shortly after launch. We allow OEMs to place light

and proximity sensing invisibly behind the OLED display and thus enable maximized screen-to-body

ratio and bezel-less phone designs. Several major smartphone platforms launched by different Asian

OEMs in the first quarter already use our behind-OLED sensing and shipment volumes are expanding.

Removing bezel-placed elements from the front side has become a trend in smartphones. Customer

traction therefore continues to be strong and we expect adoption to broaden further from this into next

year. At the same time, we are shipping significant volumes of customized TrueColor sensing solutions

for advanced display management. Another new area showing good momentum in customer adoption

is flicker detection light sensing for smartphone cameras. We have started high volume shipments of

these solutions to major Asian OEMs this year. Positioned next to world-facing picture cameras, the

detection of artificial light flicker for later elimination enables even higher picture quality in all lighting

conditions.

We continue focused development efforts for new optical sensing technologies and applications and

see increasing customer traction for our highly differentiated biosensing solution. Here we offer fast

high quality measurement of blood pressure, a very valuable health indicator, complemented by heart

rate and a range of additional personal health parameters. Our solution provides a comprehensive set

of personal health data and is able to support next generation wearables and other mobile devices.

We are pursuing several OEM engagements in this area for the next years and expect to complete the

certification for medical grade blood pressure measurement in the United States this year. Audio

sensing showed a good performance in the first quarter and our other consumer product lines offered

positive contributions. We are recording strong OEM interest in our latest active noise cancellation

(ANC) innovation which enables high quality noise cancelling for smallest size wireless earbuds.

Our automotive, industrial and medical businesses performed in line with expectations in the first

quarter. In automotive, we are seeing a less favorable market environment as demand trends continue

to be mixed across world regions. However, focused on safety, driver assistance/autonomous driving,

position sensing, and chassis control our sensing solutions cover a range of applications, Tier 1

suppliers, OEMs, and market segments. Significant R&D investments for the reported major 3D LIDAR

program for a high power VCSEL illumination system continue this year, supporting advanced true

solid-state LIDAR architectures. Our VCSEL illumination capabilities for LIDAR applications are

attracting strong interest from a number of major automotive players and we are actively pursuing

several engagements in different geographies. We also note increased traction for our VCSEL

technology for alternative LIDAR architectures like macro-mechanical spinning solutions and MEMS

micro-mirrors as we can help solve systemic challenges. New optical and 2D/3D sensing applications

inside the vehicle are gaining momentum and we are engaged in multiple design activities in this field

which appears to offer leverage opportunities for our technology portfolio. We also see potential to

include global shutter image sensors in upcoming automotive optical sensing. In the growth area of

automotive projected lighting, we are expanding our market position in safety and comfort applications

such as light carpets outside the vehicle. Here we offer advanced illumination systems leveraging our

optics and manufacturing expertise.



Our industrial business showed an attractive performance in the first quarter, reflecting a limited impact

from a less favorable demand situation in industrial end markets. As a leader in high performance

industrial sensing we serve a wide range of applications in industrial and factory automation, HABA,

other industrial sensing and industrial imaging. This extensive portfolio and application base is proving

supportive to our business in the current environment. Industrial imaging where we hold a leading

position in high performance global shutter solutions offers attractive growth opportunities for us going

forward. Our medical business recorded another solid quarter focused on medical imaging for

computed tomography (CT), digital X-ray, and mammography as well as miniature camera endoscopy.

Our market penetration in Asia is expanding further as we added another program win at an Asian

medical imaging OEM. We are the leader in micro cameras for next generation medical endoscopy

and see continued growth in the market for high quality disposable endoscopes.

Implementing last year’s strategic decision to de-emphasize our environmental sensing activities in

order to focus on mid- and long-term growth opportunities particularly in optical sensing, we recently

announced the creation of a joint venture for our environmental, flow and pressure sensor solutions

with Wise Road Capital. We will transfer IP, sensor products and solutions, relevant customers and

employees to the joint venture and expect the transaction to conclude in early fall 2019.

In operations, we have implemented a range of cost improvement measures in our Singapore

operations since the beginning of the year and have started to recognize positive effects from these

efforts. We see ongoing benefits from better cost efficiencies in our Singapore manufacturing including

lower staffing levels, together with overall improvements in the utilization of these sites. As expected,

the attractive VCSEL volumes we anticipate for this year will be fully supported by our outsourced

supply chain. Our internal VCSEL production line for new highly differentiated designs is on track for

completion and the planned front-end ramp from around the end of this year. Through the combination

of scalable outsourced and internal VCSEL capacity we are very well positioned to support expected

volume growth in the future. Capital expenditures are developing fully in line with expectations and we

are on course for significantly lower capital expenditures that we expect for full year 2019 compared to

2018.

Outlook

For the second quarter 2019, we expect a positive development of our business as the consumer

market environment appears to have stabilized and smartphone demand is expected to show lower

seasonal impacts. In addition, we have started to ramp design wins of the recent quarters which drive

broadening engagements across our Android customer base. Our other end markets generally reflect

a less favorable macro-economic environment and a higher level of cautiousness but are expected to

continue their positive contributions.

Based on available information, we expect second quarter revenues of USD 390-430 million, showing

attractive sequential growth at the midpoint and a very strong year-on-year increase of 62% at the

midpoint. The adjusted operating (EBIT) margin for the second quarter is anticipated to increase

strongly on a sequential and year-on-year basis to around 10%, benefitting from further improvements

we expect in our manufacturing operations.



Consolidated Income Statement

(unaudited)

USD thousands (except earnings per share) Q1 2019 Q1 2018

Revenue Products 373,538 407,269

Revenue Foundry & Other 16,694 10,937

Total revenues 390,232 418,206

Cost of sales -275,362 -281,580

Gross profit 114,870 136,627

Gross margin in % 29% 33%

Research and development -79,025 -56,802

Selling, general and administrative -44,265 -40,390

Other operating income 4,149 3,723

Other operating expense -44 -106

Result from equity investments -153 -83

Result from operations -4,467 42,969

Net financing result -2,822 29,675

Result before tax -7,289 72,644

Income tax result -2,177 -1,454

Net result -9,466 71,190

Basic / diluted earnings per share in CHF1) -0.12 / -0.12 0.92 / 0.86

Basic / diluted earnings per share in USD -0.12 / -0.12 0.89 / 0.83

1) Earnings per share in CHF were converted using the average currency exchange rate for the respective period.



Consolidated Balance Sheet

(unaudited)

USD thousands March 31, 2019 December 31, 2018

Assets

Cash and cash equivalents 646,619 709,929

Trade receivables 126,447 137,424

Inventories 324,741 351,950

Other receivables and assets 52,601 43,176

Assets held for sale 114,497 0

Total current assets 1,264,904 1,242,479

Property, plant and equipment 1,371,175 1,370,120

Intangible assets 1,380,274 1,387,289

Investments in associates 3,243 3,362

Deferred tax assets 18,568 18,548

Other long-term assets 8,309 8,320

Long-term financial assets 46,219 40,479

Total non-current assets 2,827,787 2,828,117

Total assets 4,092,692 4,070,596

Liabilities and shareholders‘ equity

Liabilities

Interest-bearing loans and borrowings 249,968 249,856

Trade liabilities 151,841 199,737

Tax liabilities 20,277 18,687

Provisions 95,243 91,612

Other liabilities 58,895 63,085

Liabilities associated with assets held for sale 1,161 0

Total current liabilities 577,384 622,978

Interest-bearing loans and borrowings 1,801,087 1,815,839

Employee benefits 46,055 45,786

Deferred tax liabilities 74,002 74,570

Other long-term liabilities 117,008 42,236

Total non-current liabilities 2,038,152 1,978,432

Shareholders‘ equity

Issued capital 95,867 95,867

Additional paid-in capital 813,925 806,228

Treasury shares -164,693 -134,525

Other reserves 21,292 -20,609

Retained earnings 710,764 722,225

Total shareholders‘ equity and reserves 1,477,156 1,469,187

Total liabilities and shareholders‘ equity 4,092,692 4,070,596



Consolidated Statement of Cash Flows

(unaudited)

USD thousands Q1 2019 Q1 2018

Operating activities


Depreciation (net of government grants) 76,509 54,653

Expense from stock option plan 8,807 5,390

Changes in other long-term liabilities 1,245 -1,319

Result from sale of plant and equipment 0 -20

Result from investments in associates 153 83

Net financing cost 2,822 -29,675

Change in inventories 22,326 4,205

Change in trade and other receivables 2,607 27,254

Change in trade and other payables -14,957 -54,617

Change in provisions and employee benefits 5,115 -17,083

Change in deferred income 0 -4,021

Tax payments -1,254 -5,457

Cash flows from operating activities 96,083 52,036

Investing activities

Acquisition of intangibles, property, plant and equipment -87,890 -160,700

Acquisition of subsidiaries net of cash acquired -9,198 -25,809

Acquisition of other financial investments 0 -2,738

Proceeds from sale of plant and equipment 1 20

Interest received 1,645 700

Cash flows from investing activities -95,441 -188,527

Financing activities

Proceeds from borrowings 14,144 0

Repayment of debt -40,310 -343,120

Repayment of finance lease liabilities -4,004 -22

Proceeds from issue of convertible notes 0 694,703

Acquisition of treasury shares -31,382 -122,450

Sale of treasury shares 1,214 11,572

Interest paid -6,356 -4,597

Cash flows from financing activities -66,694 236,086

Net increase in cash and cash equivalents -66,052 99,595

Effects of changes in foreign exchange rates on cash and cash equivalents

2,742 -4,754

Cash and cash equivalents pledged as security 0 36,311

Cash and cash equivalents at begin of period 709,929 327,457

Cash and cash equivalents at end of period 646,619 458,608



Reconciliation from adjusted figures to reported figures

USD thousands Q1 2019 Q1 2018

Gross profit – adjusted 126,174 149,951

Acquisition-related costs -10,535 -12,767

Share-based compensation costs -769 -558

Gross profit – reported 114,870 136,627

Gross margin in % – adjusted 32% 36%

Gross margin in % – reported 29% 33%

Operating expenses – adjusted -102,668 -78,566


Share-based compensation costs -8,064 -7,157

Operating expenses – reported -119,337 -93,658

Result from operations – adjusted 23,506 71,385



Result from operations – reported -4,467 42,969

Operating margin in % – adjusted 6% 17%

Operating margin in % – reported -1% 10%


Financial statements in EUR



Consolidated Income Statement

(unaudited)

EUR thousands (except earnings per share)

Q1 2019 Q1 2018

Revenue Products 328,934 358,638

Revenue Foundry & Other 14,701 9,631

Total revenues 343,635 368,269

Cost of sales -242,482 -247,957

Gross profit 101,154 120,312

Gross margin in % 29% 33%

Research and development -69,588 -50,020

Selling, general and administrative -38,979 -35,567

Other operating income 3,654 3,278

Other operating expense -39 -93

Result from Equity Investments -135 -73

Result from operations -3,934 37,838

Net financing result -2,485 26,132


Income tax result -1,917 -1,280

Net result -8,336 62,690

Basic / diluted earnings per share in CHF1) -0.12 / -0.12 0.92 / 0.86

Basic / diluted earnings per share in EUR -0.10 / -0.10 0.78 / 0.73

1) Earnings per share in CHF were converted using the average currency exchange rate for the respective periods.



Consolidated Balance Sheet

(unaudited)

EUR thousands March 31, 2019 December 31, 2018

Assets

Cash and cash equivalents 569,407 625,158

Trade receivables 111,348 121,015

Inventories 285,964 309,924

Other receivables and assets 46,320 38,021

Assets held for sale 100,825 0

Total current assets 1,113,864 1,094,117

Property, plant and equipment 1,207,445 1,206,516

Intangible assets 1,215,458 1,221,635

Investments in associates 2,855 2,960

Deferred tax assets 16,351 16,333

Other long-term assets 7,317 7,327

Long-term financial assets 40,700 35,645

Total non-current assets 2,490,126 2,490,416

Total assets 3,603,990 3,584,534

Liabilities and shareholders‘ equity

Liabilities

Interest-bearing loans and borrowings 220,120 220,022

Trade liabilities 133,710 175,887

Tax liabilities 17,856 16,455

Provisions 83,870 80,673

Other liabilities 51,862 55,552

Liabilities associated with assets held for sale 1,022 0

Total current liabilities 508,440 548,589

Interest-bearing loans and borrowings 1,586,022 1,599,013

Employee benefits 40,556 40,319

Deferred tax liabilities 65,165 65,666

Other long-term liabilities 103,036 37,193

Total non-current liabilities 1,794,780 1,742,191

Shareholders‘ equity

Issued capital 84,420 84,420

Additional paid-in capital 716,736 709,958

Treasury shares -145,028 -118,462

Other reserves 18,750 -18,148

Retained earnings 625,893 635,986

Total shareholders‘ equity and reserves 1,300,771 1,293,754

Total liabilities and shareholders‘ equity 3,603,990 3,584,534



Consolidated Statement of Cash Flows

(unaudited)

EUR thousands Q1 2019 Q1 2018

Operating activities


Depreciation (net of government grants) 67,373 48,127

Expense from stock option plan (acc. to IFRS 2) 7,755 4,746

Changes in other long-term liabilities 1,096 -1,161

Result from sale of plant and equipment 0 -17

Result from investments in associates 135 73

Net financing cost 2,485 -26,132

Change in inventories 19,660 3,703

Change in trade and other receivables 2,296 24,000

Change in trade and other payables -13,171 -48,095

Change in provisions and employee benefits 4,504 -15,044

Change in deferred income 0 -3,541

Tax payments -1,105 -4,806

Cash flows from operating activities 84,610 45,823

Investing activities

Acquisition of intangibles, property, plant and equipment -77,395 -141,511

Acquisition of subsidiaries net of cash acquired -8,099 -22,728

Acquisition of other financial investments 0 -2,411

Proceeds from sale of plant and equipment 1 17

Interest received 1,449 617

Cash flows from investing activities -84,045 -166,015

Financing activities

Proceeds from borrowings 12,455 0

Repayment of debt -35,497 -302,149

Repayment of finance lease liabilities -3,526 -19

Proceeds from issue of convertible notes 0 611,750

Acquisition of treasury shares -27,635 -107,829

Sale of treasury shares 1,069 10,190

Interest paid -5,597 -4,048

Cash flows from financing activities -58,731 207,895

Net increase in cash and cash equivalents -58,165 87,702

Effects of changes in foreign exchange rates on cash and cash equivalents

2,415 -4,186

Cash and cash equivalents pledged as security 0 31,975

Cash and cash equivalents at begin of period 625,158 288,356

Cash and cash equivalents at end of period 569,407 403,847



Reconciliation from adjusted figures to IFRS reported figures

EUR thousands Q1 2019 Q1 2018

Gross profit – adjusted 111,108 132,046


Share-based compensation costs -677 -491

Gross profit – IFRS reported 101,154 120,312

Gross margin in % – adjusted 32% 36%

Gross margin in % – IFRS reported 29% 33%

Operating expenses – adjusted -90,409 -69,184



Operating expenses – IFRS reported -105,087 -82,474

Result from operations – adjusted 20,699 62,861



Result from operations – IFRS reported -3,934 37,838

Operating margin in % – adjusted 6% 17%

Operating margin in % – IFRS reported -1% 10%



ams AG

Tobelbader Strasse 30

8141 Premstaetten, Austria

T +43 3136 500-0

[email protected]

www.ams.com

This report is also available in German. All figures are unaudited.

first quarter report 2019

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